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Legislative action in Lansing has set the stage for debate later this fall on reforming state regulations governing major capital investments and clinical services by hospitals and health care providers.

Up for consideration during the lame-duck session of the Legislature is a bill, passed last month by the Senate Health Policy Committee on a 3-2 party-line vote, that would strip three procedures from current certificate of need regulations and transfer the program’s administration from the Michigan Department of Community Health to the Department of Consumer and Industry Services.

Sen. John Schwarz, R-Battle Creek, pushed the bill through committee in order to bring the issue to the forefront during the post-election Senate session and prevent it from being put off until next year. Schwarz fully expects a substitute bill to come out of the session, as legislators and interested parties debate and negotiate a final version that’s designed to make CON more effective and efficient.

“I put a lot of things in the re-write that would get people’s attention,” he said. “And now the real work begins.”

The bill, as passed in committee and sent to the full Senate, would completely remove from CON requirements fixed and mobile MRI units and require new licensing procedures for air ambulances and lithotripsy, a procedure that uses shock waves to pulverize kidney stones. The bill also would raise the threshold where a CON is required for a capital improvement project or equipment purchase related to a clinical procedure from $2 million to $2.5 million — and from $3 million to $5 million for a nonclinical service.

Schwarz, a physician, would transfer the program from the Department of Community Health, because the Department of Consumer and Industry Services is the state agency that handles professional licensing.

“CON is essentially licensing and regulation,” he said.

Certificate of need requires hospitals and health care providers to justify a market demand before they may initiate certain clinical services and undertake major capital improvements. The goal is to prevent the costly duplication of medical services.

But many in the health care community now see CON as a poorly run program that’s become costly and burdensome and stifles competition. Critics in the past have often cited long delays of up to three or four weeks to have an MRI as an example of the program’s ineffectiveness. With changes in state standards for MRIs earlier this year to substantially increase the number of devices deployed throughout the state, those delays are now quickly easing.

“The process right now that functions, or dysfunctions or malfunctions, is ponderous. It’s got to be more responsible,” Schwarz said. “We’re trying to smooth the process out and make it work.”

Sen. Glenn Steil, R-Grand Rapids, last year proposed a bill to completely repeal CON in Michigan, as many other states have done in recent years. But his bill has not received enough support to move forward, as many other legislators and interest groups instead advocated reforming CON to make it work better and blamed many of the problems on the Department of Community Health’s administration of the program.

Lody Zwarensteyn, president of the Grand Rapids health care planning agency Alliance for Health that conducts local CON application reviews on behalf of the state, likes much of what he sees in Schwarz’s bill, although he worries about eliminating standards for providers who want to expand or initiate MRI services.

Zwarensteyn, a defender of CON who readily concedes it’s in need of reform, especially likes transferring the program to the Department of Consumer and Industry Services, as well as a provision that would allow third parties with an interest in a project to appeal a decision on an application, a change he says would alleviate the potential for “political shenanigans” in CON reviews by the state.

“His bill has some things that are very, very nice,” Zwarensteyn said.

Other provisions proposed include revised and increased reporting procedures for the Department of Consumer and Industry Services and annual reviews of the CON application process.

Bob Meeker, strategic program manager at Spectrum Health in Grand Rapids, testified before the Senate Health Policy Committee last month in favor of some portions of the bill, while opposing others.

Meeker likes provisions such as making the commission that establishes standards more representative of the entire state and increasing monetary thresholds. He objected to the removal of MRI, lithotripsy and air ambulances from CON standards, citing concern over the duplication of services, and also disliked allowing third parties to appeal a decision on an application.

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